A new proposal before the City Council aims to prevent another controversial privatization deal like the infamous parking meter lease of 2008, but some critics say the plan doesn’t go far enough.
Joining Chicago Tonight to discuss the proposed ordinance is Judy Stevens, policy coordinator at the Better Government Association, which consulted the Emanuel administration when crafting the ordinance.
The proposal is backed by Mayor Rahm Emanuel and puts safeguards in place when city assets are up for sale. Those checkpoints include:
- A 90-day review period for privatization deals
- A public hearing before the deal goes before the City Council
- An independent financial review of the deal that examines whether each deal holds the “best interest of the city and its residents” and whether the selection process was “fair and transparent”
- A “plain-English summary” of the proposed asset lease made available for public input
The ordinance also requires performance reviews of contractors awarded city assets, and the city must set aside at least 10 percent of the proceeds from the lease.
The proposed ordinance has the “potential to improve transparency and public notice requirements,” according to the Civic Federation President Laurence Msall, but he also says it fails to “address the fundamental defect in the city’s past privatization efforts.”
That defect is the habit of spending proceeds from privatization deals on one-time costs, such as plugging holes in the city’s operating budget.
“All of the proceeds from such sales should be used to improve the city’s long-term financial health and stabilization,” Msall said. “[Those funds] shouldn’t be used as an operating windfall because they are a one-time revenue source, and not 10 percent as proposed but 90 percent of proceeds -- as was in the Midway ordinance and Midway statue -- should be aimed at non-operating investments.”
Some critics say the proposed ordinance falls short. That’s because it would only apply to assets worth at least $400 million and services worth at least $3 million.
“I don’t understand the cutoff,” Msall said of the minimum financial requirements outlined in the ordinance. “I would say the recently hired independent City Council budget administrator should definitely be reviewing these proposals and should be providing the [City] Council with independent assessments as to their value.”
If the ordinance were in place when the parking meter deal was made, would it have changed much?
“It certainly would’ve allowed for more public review, and thus, perhaps, more aldermanic review of the parking meter lease,” he said. “The Civic Federation was not able to weigh in on the parking meter lease transaction because there was insufficient time to evaluate what was being proposed. It was introduced and passed in less than five working days which didn’t allow any opportunity for independent review of that $1.15 billion, 75-year contract.”
While the parking meter deal stands out as a bungled privatization deal, Chicago was on the forefront of privatization of the city’s Skyway and parking garages.
“[These were] two areas the city was not very effective in terms of managing. It’s important to point out that the parking garages were competing with private sector garages and were having trouble meeting their financial needs,” Msall said. “The Skyway was the only toll bridge operated by the city and had a history of financial challenges, and privatization of those responsibilities provided both a significant financial benefit to the city and taxpayers and no discernable decline in the services. And in many cases improved investments were made.”
Privatization and alternative service delivery has been used by municipalities across the country. The Reason Foundation, a nonprofit organization whose mission is to “advance free minds and free markets,” releases an annual report on local government privatization. Listed below are highlights from the foundation’s 2014 report:
- Pontiac, Mich., contracted out 20 city functions, including trash collection, building services, road and streetlight maintenance, and administrative support for IT, auditing, budgeting and legal services, from 2011 to 2013.
- Indianapolis privatized city parking meters in 2011.
- Omaha, Neb., entered into a 5-year contract in 2013 for private management of city owned parking garages and parking lots.
- Detroit entered into contracts with private waste haulers in 2014.
- Palo Alto, Calif., approved a plan in 2013 to outsource street sweeping services.
- Santa Monica, Calif., approved a contract in 2013 for outsourcing of bill collection services.
- Philadelphia announced in March 2014 it would sell publicly owned Philadelphia Gas Works to UIL Holdings.